Considering the last few quarters, it’s no surprise that investment banks are looking to cut costs. The mass layoffs at Deutsche Bank and HSBC are the headliners, yet those cuts were predicted well before they were announced. There are other, more subtle signs that Wall Street banks may be retrenching in fear of an economic downturn, or at least a storm of factors that will drag down revenues further.
One potential sign comes from a Dealbreaker report suggesting J.P. Morgan made full-time offers to between 0% and 20% of their summer associate interns, depending on the group. The reported offer rate for summer analysts was also low: around 50% to 60%, according to the report. J.P. Morgan declined to comment on its offer rates. However, a senior banker there said there were rumors that the bank planned to be more “conservative” with junior hires for 2020, although it's “inconceivable” that they'll be as low as 10% to 20% of the total, he said.
It may not only be J.P. Morgan that's curtailing its enthusiasm for hiring juniors. Dealbreaker also reported that only around 30% of summer associate interns were given offers at RBC Capital Markets, though the bank issued a statement saying the offer rate for SAs was actually more like 50%.
Like JPM, Barclays and Bank of America declined to comment on its offer rates. However, a source close to Bank of America said the firm’s conversation rates are on track to exceed the 70% threshold it crossed last year. Goldman Sachs was more definitive, stating on record that “the number of offers we are extending this year is on par with previous years.” Morgan Stanley, Citi and Credit Suisse didn’t immediately return requests for comment.
Students who want to work in banks are definitely hurting. Mark Ross, a career coach for finance students, posted the following message on his social media channels this week: “This is an incredibly difficult post to write. I have become emotionally involved and I feel connected to hundreds of you. Over the past two weeks I have gotten many messages from connections who have worked hard this summer and did not receive return offers. It really hurts, I know.”
A veteran Wall Street headhunter told us that offers for juniors are indeed slightly down across the industry as a whole. He noted that this type of action can be more telling than when expensive managing directors are cut. Scaling back on junior hires who won't start until the following year is often a sign that banks are planning for potential economic instability, or a recession.
There are signs too that the slowdown is extending to technology, where recruitment has been buoyant for years. Tech-related job openings at investment banks based in New York have plummeted over the last several months, with banks like J.P. Morgan seeing their tech vacancies cut in half in New York as well as in Jersey City, where they house a good amount of their back-office staff.
And then there's the fact that Goldman Sachs this year has issued five separate notices to the New York State Department of Labor notifying them of impending cuts, compared to none last year or in 2017. The last time Goldman made this number of announcements was 2016, when seven were made during a down year for the bank. A source close to Goldman said the latest cuts were part of the bank's annual purging of roughly 5% of its staff, though the bank typically completes the purge earlier in the year as it begins replacing sacked underperformers.
Meanwhile, Deutsche Bank and Barclays recently acknowledged that they are planning to move a combined 135 jobs away from New York City by mid-autumn. Deutsche Bank has classified the move as a layoff – the jobs are headed to Jacksonville, Florida but current employees aren't coming with – while Barclays said the move to Whippany, New Jersey will include transfers and “separations.”
The sky isn't falling, but taken together the various rumblings paint a picture of a nervous Wall Street that may be trying to get ahead of more extreme economic uncertainty. It's not an easy time to be a student trying to get into the industry. Nor may it be an easy time to be an experienced banker out on the street.
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